Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Irish Independent
Irish Independent
Charlie Weston Twitter Email

Banks to hit variable-rate holders – as ECB to announce another hike

Higher mortgage repayments are on the way for everyone

People with variable-rate mortgages at the main banks have been warned they are next in line to face hikes in their repayments.

The warning comes as the European Central Bank ( ECB) is preparing to announce its fifth rate rise today.

AIB Group, Bank of Ireland and Permanent TSB have spared their variable-rate customers up to now, despite the ECB having raised rates four times since last July.

Mortgage experts said this is not set to last. Two more ECB rate rises are expected in the next few months.

They pointed out that some variable rates are as low as 2.75pc, as they have not yet gone up.

The ECB’s refinancing rate is set to go to 3pc with today’s announcement. That means that a variable rate of 2.75pc is now below the cost of funding such a mortgage.

Up to now the banks have concentrated on fixed rates. The three main banks have each pushed up fixed rates by one percentage point in the last few months.

Automatic rises for the 200,000 or so Irish homeowners with tracker mortgages are also on the way, with the ECB’s main refinancing rate set to go from 2.50pc to 3pc.

And more fixed-rate rises are in prospect.

The average margin on a tracker is around 1.15 percentage points – which means the average tracker customer is set to end up paying 4.15pc compared with just 1.15pc less than a year ago.

For those with €150,000 remaining on their mortgage, the move will add around €35 a month to repayments.

When all increases since July are taken into account, the total increase works out at more than €200 a month, according to calculations by Daragh Cassidy of price comparison site

The ECB is likely to raise rates yet again when it next meets in March, he said.

“The ECB’s move was widely expected, and it will hike again in March. The question is when and by how much the main lenders here will respond.”

He said it was clear more increases are on the way.

Those on variable rates are being warned that they will likely see an increase in their repayments over the coming weeks. Until now, the three main lenders have not hiked their variable rates in response to any of the ECB rate increases.

There are around 200,000 Irish borrowers on variable rates. As variable rates were already high in Ireland prior to the ECB starting to raise rates, it is unlikely the full increases will be passed on.

“However, an increase of up to one percentage point for existing variable-rate customers is highly likely over the coming weeks,” said Mr Cassidy.

AIB and its subsidiary Haven still offer a variable rate of 2.75pc for those with a big deposit or a lot of equity in their home.

Broker Michael Dowling of Dowling Financial said the variable rates at AIB Group “stood out as exceptionally good value”. The group’s variable rates are between 2.75pc and 3.15pc, depending on the loan to value (LTV).

Permanent TSB’s variable rates are between 3.5pc and 3.9pc, depending on LTV. Bank of Ireland has variable rates of between 3.9pc and 4.5pc.

Karl Deeter of, a broker service, said higher rates across the board were likely to be charged by all lenders – as banks which take deposits are coming under huge pressure to pay more to savers.

Hardest hit by this week’s ECB rate rise are those whose mortgages were taken over by a vulture fund. They have been passing on rate rises in full, with most of the homeowners on variable rates.

Vulture funds are already charging their customers around 6.5pc, with some charging 7pc. And they generally will not offer fixed rates.

Some 113,000 mortgages are owned by unregulated vulture funds, and managed by regulated credit servicers like Pepper and Start.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.